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TMI Blog1974 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ust Private Ltd. (hereinafter referred to as " the trust company "). It held 54 shares out of 200 shares of the trust company. The main object of the trust company was to hold shares in other companies. It was also authorised to advance or loan moneys on security of shares, stocks, etc., and also to receive moneys on deposit, interest, or otherwise, and to lend moneys to other persons with or without security and on such terms as it was expedient and in particular to customers and all other persons having dealings with it. In the year of account 1956-57, it had a current account with the trust company. There are very few entries in this account though it is described as a current account in the statement of the case. It opened with a credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause the amount should be regarded as income by way of dividend within the meaning of the Act. This decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and in further appeal by the Tribunal. The Tribunal, inter alia, pointed out that the fact that the amount was kept by the assessee for a short time was not a relevant factor. In the opinion of the Tribunal the scheme of the section was that any use of accumulated profits of a company made by shareholders must attract the charge ; that this was not a case which was covered within the language of the exemptions contained in the clause which defines the word " dividend ", and in the reserve account, as the sum of Rs. 1,62,264 was the amount rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company... " This part of the definition of the word was introduced by the Finance Act of 1955. It has the effect of bringing to tax as dividend in the hands of the shareholders three types of payments made by a company, namely : (a) any payment of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder ; (b) any payment on behalf of a shareholder ; and (c) any payment for the individual benefit of a shareholder. A payment in any of the three cases is regarded as dividend only to the extent to which the company possesses accumulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further deposit of Rs. 78,090 on April 28, 1956, by the assessee with the trust company. As against this on May 15, 1956, the assessee received from the trust company a sum of Rs. 13,000 and on September 13, 1956, a sum of Rs. 65,110. So far as the credit side is concerned there is also an entry of Rs. 355 under date March 5, 1957. If regard be had to these entries then there was a negligible credit balance in favour of the assessee in the account with the trust company. On March 5, 1957, the assessee received from the trust company a sum of Rs. 1,70,001.50, and it repaid to the trust company on March 28, 1957, a sum of Rs. 1,70,224.56. At the end of the closing year on March 31, 1957, the assessee paid to the trust company a sum of Rs. 543 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that in the case of a company, in which the public are not substantially interested within the meaning of section 23A, any payment by such company of a sum by way of loan or advance to a shareholder or any payment by such company on behalf of such shareholder or for the individual benefit of such shareholder is to be treated as dividend. For the purpose of clause (e) it cannot be read as ejusdem generis with the provisions of clauses (a) to (d) because there is no common genus. Clauses (a) to (d) deal with permanent distribution of moneys while clause (e) deals with payment on behalf of a shareholder or payment to a shareholder by way of advance or loan irrespective of the duration of such loan or advance. The argument of Mr. Mehta f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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